John Keells Tea Market Report:

Sri Lanka tea prices show steady rise

Sri Lanka’s Rupee fell to a record Rs.132.20 against the dollar breaking the previous record of Rs.131.60 on March 19, 2012. The impact of the devaluation and rising energy prices will have a bearing on the cost of production and could lead to lesser profit margins.

On the other hand, with the recent devaluations, Sri Lanka tea prices have shown a steady rise from all elevations exceeding last years corresponding sales, but remain below in US dollar terms. The rising demand we are witnessing could be due partly to the drop in world, black tea production in the first quarter of the year from some of the major tea producing countries.

Sri Lanka Tea crop of 27.2 Mkgs for the month of March 2012 has recorded a significant drop of 7.9 Mkgs (23%) compared to 35.1 Mkgs for the corresponding month of 2011.

All three elevations have recorded shortfalls with High Grown in particular recording, the highest deficit of 39% followed by medium 34% and low at 10%. The large variance particularly from the High and Medium elevations could be attributed to adverse weather conditions in the first quarter of 2012. Most of the tea growing areas experienced extremely dry weather conditions in the first three months of the year giving way to heavy afternoon showers in April.

Although the variance for the month, may appear to be high, weather conditions in the first quarter of last year was ideal for growth, paving the way for a record crop of 35 Mkgs in March. Incidentally the crop harvested was the highest on record surpassing the previous best of 32.4 Mkgs in 2008.

Production in the first quarter of 2012 recorded a 6.66% deficit compared to 2011 with High Grown recording a variance of 15.5%. With most plantations reporting fairly satisfactory weather conditions for growth, the outlook for April looks promising.

The 1.1Mkgs of Ex Estate teas, that came up for sale today met with improved demand, particularly for BOPFs. BOPs on the other hand were irregular and were less sought after.

The better BOP/BOPFs in the Western High Grown category sold in the range of Rs.425 to Rs.475 and Rs.450 to Rs.510 respectively.

The bottom end of the market, however settled at Rs.320 to Rs.330 and Rs.375 to Rs.385 respectively.

Other than for a few bright Nuwara Eliya BOPs that gained Rs.5 to Rs.10, others were mostly firm. BOPFs on the other hand showed a drop in prices of Rs.10. Prices for Uva BOP/BOPFs followed a similar trend to the Western with BOPFs appreciating Rs.5 to Rs.10.

Low Grown CTC PF1s maintained last levels, whilst the BP1s advanced Rs.10 to Rs.20. A few High and Medium PF1s advanced Rs.10 on special inquiry, others were firm. BP1s were firm to dearer.

The Low Grown average at the sale of April 17 reached Rs. 439/79 which was an increase of approximately Rs.22, when compared with the previous week. At this week’s Low Grown sale, the prices for some Leafy Grades such as Pekoe, OP1 and select best FBOPs eased marginally, but all others maintained previous levels. However, prices could still be quoted as quite attractive.There was excellent demand from Russia, Libya, Iran and Iraq whilst the other Middle Eastern markets also lent useful support.

Western Teas

Select best BOPs were barely steady, other good invoices advanced Rs. 10, below best sorts were irregular, plainer varieties were firm to marginally dearer. Select best BOPFs advanced Rs. 10, other good invoices were firm to dearer, below best and plainer sorts advanced Rs. 5 to Rs. 10 on average. Medium BOPs declined Rs. 5 to Rs. 10. BOPFs advanced by a similar margin.

Nuwara Eliya Teas

Brighter BOPs advanced Rs. 10 to Rs. 20, others were firm. BOPFs declined Rs. 10.

Uva Teas

BOPs advanced Rs. 5 to Rs. 10. BOPFs were firm to Rs. 10 dearer. Uda Pussellawa BOPs gained Rs. 5 to Rs. 10. BOPF were firm.

CTC Teas

Low Grown PF1s were firm. BP1s advanced Rs. 10 to Rs. 20. A few High and Medium PF1s advanced Rs. 10 following special inquiry, others were firm. BP1s were firm to dearer.

Low Growns

Excellent demand. Select best OP1s shed Rs. 60 to Rs. 80 whilst best types too were irregularly lower by Rs. 10 to Rs. 15, below best and poor sorts were firm. Select best BOP1s gained Rs. 5 to Rs. 10, clean best types too were dearer by a similar margin whilst others maintained last levels. Select best along with the best OPs declined Rs. 10 to Rs. 20, below best and poor sorts were firm. Select best OPAs declined sharply by Rs. 30 to Rs. 50 best types too were irregularly lower by Rs. 5 to Rs. 10, below best and poor sorts were steady. Select best Pekoes maintained last levels, best types declined sharply by Rs. 20 to Rs. 40, however the below best bold Pekoe varieties advanced sharply by Rs. 20 to Rs. 40 and more at times, flaky types were fully firm. Select best Pekoe1s shed Rs. 5 to Rs. 10, best types too were lower by Rs. 10 to Rs. 15, below best were dearer by Rs. 10 to Rs. 15, poor sorts were steady.

Select best and best BOP’s advanced Rs. 20 to Rs. 30, and more at times towards the close of the sale, best and below best types advanced Rs. 10 to Rs. 20, poor types gained Rs. 5 to Rs. 10. Select best and best BOP.SPs moved up Rs. 10 to Rs. 15, below best and poor sorts too advanced Rs. 10 per Kg. Select best FBOPs were irregular to last, best and below best types moved up Rs. 20 to Rs. 30, poor sorts gained Rs. 10 to Rs. 20. Select best and best FBOPF1s gained Rs. 20, below best and poorer types gained Rs. 10 to Rs. 20 and at times more. Select best and best tippy sorts met with excellent demand and were much dearer to last, below best and poor types too gained above last levels.

Off Grades

Select best and best liquoring Fngs1s were firm to dearer by Rs. 10, below best and poorer sorts appreciated by Rs. 10 to Rs. 15. Select best and best BMs appreciated Rs. 10 whilst the below best and poorer sorts were dearer by Rs. 15. All BPs were irregularly dearer by Rs. 10. All Low Grown Fngs appreciated Rs. 20. Select best and best BOP1As were dearer by Rs. 10 to Rs. 15, poorer sorts too gained Rs. 15 to Rs. 20 and more at times.

Dust

Select best Dust1s were firm, whilst the best Dust1s gained sharply, below best types were irregularly lower by Rs. 5 to Rs. 10, poorer sorts declined by Rs. 10 to Rs. 15. Clean secondaries along with the below best types gained Rs. 15 to Rs. 20 whilst the balance were firm. Best Low Grown Dusts / Dust1s were firm whilst the below best types appreciated Rs. 5 to Rs. 10, balance were irregular.